Absolute Return

Absolute return is a measure of the gain or loss of an investment or a portfolio over a specified period of time, regardless of any benchmark or market condition. It is also known as the total return. Absolute return can be positive or negative, and it reflects the actual performance of the investment.

Some examples of absolute return strategies are:

• Hedge funds: These are funds that use various techniques, such as short selling, leverage, derivatives, arbitrage, and unconventional assets, to generate positive returns regardless of the market direction. Hedge funds aim to achieve absolute returns by exploiting market inefficiencies and taking advantage of price movements.
• Carry trade: This is a strategy that involves borrowing money from a country with a low interest rate and investing it in another country with a higher interest rate, thus earning the difference. Carry trade can generate absolute returns as long as the exchange rate does not move against the position.
• Long-short equity: This is a strategy that involves buying undervalued stocks and selling overvalued stocks, thus profiting from both sides of the market. Long-short equity can generate absolute returns by capturing the relative performance of different stocks, sectors, or markets.